Thames Water has said crisis talks to secure its future with lenders are taking “longer than expected” and will drag into 2026 as it faces the prospect of a collapse into government control.
Britain’s biggest water company on Wednesday said it had swung to a profit of £414m for the six months to September helped by bills rising by nearly a third, after losing £149m in the same period in 2024.
Despite the jump in reported profits, the company said there was “material uncertainty which may cast significant doubt” on its status as a going concern. A collapse into government control under a special administration regime (SAR) – a form of temporary nationalisation – “could occur in the very near term” if it is unable to agree the terms of a formal takeover by its controlling lenders.
Those creditors have asked the regulator, Ofwat, and the government for Thames to be let off future fines for pollution, arguing the prospect of hundreds of millions of pounds of extra costs is making a turnaround impossible.
The standoff has already continued for months longer than originally anticipated and the talks were expected to have concluded by the end of the year.
On Wednesday, the company said: “Discussions are taking longer than expected but this is a complex situation and the current phase of the restructuring plan will likely take a number of months to conclude.”
Revenues rose by 40% to nearly £2bn after the company was allowed to raise customers’ bills by 31% in April. Thames Water insisted it was making good operational progress, helped by a 22% increase in investment to £1.26bn, paid for by the bills increases.
Thames Water has been on the brink of collapse for more than a year as it has struggled under the weight of £17.6bn of net debt, built up over decades since privatisation.
The supplier, which serves 16 million customers in south-east England, has been dogged by poor environmental performance, with sewage leaks provoking public and political outrage and adding huge costs in the form of fines.
The number of sewage spills into rivers and seas dropped by 20% during the period, to 292 as some of its investment took effect. The bills increase prompted a 75% increase in complaints to more than 55,000 during the period, although complaints linked to its water and wastewater services dropped by 11%.
The utility came close to being taken into temporary government control earlier this year when it was forced to gain court approval for a £3bn emergency funding plan that also wrote down the value of some of its debts to zero. Since then it has been working on a second deal to restructure the rest of its debts and pass formal ownership to its lenders.
Those bondholders are led by a group of hedge funds including the combative US firms Elliott Investment Management and Silver Point Capital, as well as more traditional investors such as Aberdeen and Insight Investment. Within proposals to the government, bondholders have asked for 15 years of leniency from environmental fines from the government to try to recover.
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However, talks have dragged on over months, with Thames surviving by gradually spending the £3bn of emergency funding.
Thames Water also revealed it had paid £57m during the six-month period in fees for advisers on the process such as bankers, lawyers and public relations consultants.
The government has so far proved averse to granting any regulatory leniency, meaning that the investors will not commit. Yet ministers are also desperate to avoid taking control under an SAR.
Chris Weston, Thames Water’s chief executive, said: “The first half of this year has been shaped by good progress across all areas of our operational transformation. We saw a 20% drop in pollutions and leakage performance is holding steady despite the extremely dry summer.
“This progress has all been achieved as we also manage the recapitalisation of the business. We continue to work closely with stakeholders to secure a market-led solution that we believe is in the best interests of our customers and the environment.”
The company lost £1.6bn before tax in the year to March because of a £1.3bn credit loss.
